When a company announces a corporate action like a bonus issue, stock split, or dividend, it affects the share price. Since F&O contracts are based on the underlying stock price, these actions impact your open F&O positions too.
How does it work?
For corporate actions like stock splits, bonus issues, and rights issues, the exchange automatically adjusts the lot size and strike prices of F&O contracts on the ex-date. You do not need to modify your positions manually.
For dividends, regular dividends are already priced into futures and contracts are generally not adjusted. For special or extraordinary dividends, the exchange adjusts the strike prices of options contracts accordingly.
What you should keep in mind
All adjustments are done automatically by the exchange and are designed to ensure that neither the buyer nor the seller gains or loses value purely due to the corporate action. Always check exchange circulars for the exact adjustment factors applied to your contracts around corporate action dates.
Easy & quick
Leave A Comment?